Over the past year, the debt crisis in Europe has dominated headlines and investor sentiment, stoking high levels of volatility and “risk-on/risk-off” market patterns. Consequently, 2011 marked a year where riskier assets sold off, while perceived “safe haven” investments—such as US Treasuries, German Bunds and precious metals—delivered strong returns. In 2012, a key question for many investors is: Will global markets stabilize or will risk aversion once again, drive market trends?

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In a new white paper – “European Debt Crisis in Focus: Time to Re-Risk Portfolios?” – Robert Parker, Managing Director and Senior Advisor to Credit Suisse, tackles this question, arguing that the time might be right for investors to consider increasing their exposure to risky assets. The paper also provides views on different asset classes and which risk strategies may be well positioned – such as equities, emerging markets, corporate credit and commodities.

According to Mr. Parker, several risks that concerned investors last year – such as a global recession or a hard landing in China – may have diminished. Recent actions taken by the ECB to provide liquidity to banks and Eurozone governments’ plans to bring their deficit levels to more manageable levels have modestly improved market sentiment. While there are a number of risks that will require close monitoring in the short term, Mr. Parker believes investors’ risk appetite may gradually increase, with a sustained rally anticipated for the latter half of 2012.

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